AUTO dealers are painting a gloomy picture for business this year, driven by a strengthening Japanese yen and increased government taxes that could see prices on motor vehicle jump at least five per cent by mid year.

Last year, vehicle sales fell by approximately 40 per cent over the previous year and the dealers’ prognosis is that 2010 will be the same if not worse.

As the economic noose tightens on consumers, dealers are saying that the increased levies on vehicles will make purchasing even more prohibitive in the coming months.

According to Ian Lyn, president of the Jamaica Used Car Dealers Association (JUCDA), lagging sales is already forcing some dealers to contemplate closure of their businesses.

“Consumers are simply not buying because of the high price of vehicles,” Lyn told Auto this week. “Many dealers are looking to close their dealership,” the JUCDA president added.

He contends that despite the government stimulus late last year, prices on vehicles are increasing as the yen strengthens and the newly imposed tax takes effect.

“Not only are we paying the 17.5 per cent GCT but now dealers have to pay an additional five per up front,” explained Lyn, who is also general manager of New Line Motors.

In its most recent tax package in December, government increased the GCT on vehicles by one percentage point from 16.5 to 17.5, effective January 1.

Lyn added that a luxury tax is now also being charged on 3.0 litre vehicles.

These increases in taxes, the dealers contend, have compounded the effects of a strong yen, which has pushed up CIF (cost, insurance and freight) charges to vehicle importers.

“This year, car prices are going to reach record highs as the CIF cost is increasing because of the price of the yen,” Lyn commented.

“I see prices increasing by about five per cent by mid year,” he added.

Head of the Automobile Dealers Association (ADA), Kent La Croix, also sees a substantial increase in vehicle prices this year.

“After dealers get rid of existing stock, prices will go up significantly,” he surmised.

La Croix said that prices have already started to increase and will continue its upward move as the year progresses.

“Any vehicle that has come in since September has increased in price,” he said, adding that the government stimulus package applied to vehicles that were imported before September last year.

And even with lowered lending rates and softer terms to the motor car market by financial institutions, consumers, according to La Croix, are still pressured.

“People are being very cautious,” he said. “Every day there are additional costs.”

Howard Foster, marketing manager at Toyota Jamaica, sellers of the country’s leading brand tells Auto that he sees a struggle to maintain even last year’s sales figures.

“It looks bleak, it will more likely be the same if not worse than last year,” he remarked, adding that last year business dropped about 40 per cent.

“It’s worse now as prices have gone up with the increase in GCT, so it is going to be a struggle,” Foster added.

Immediate past president of the JUCDA, Kenneth Shaw, while agreeing that there would be difficulties in the market, added that he was however optimistic.

“It (the year) has started off very slow,” he said. “We are facing a period of more severe hardship than we had last year.”

Acknowledging the movement of the yen and its impact on international vehicle pricing Shaw nonetheless placed hope in a stabilisation of the economy hinged on Government’s pending agreement with the International Monetary Fund (IMF).

“I remain optimistic that things will show some sort of relief by the second quarter,” he told Auto.

“We just have wait and see what happens come March.”